Qantas faces bumpy flight on wage bargaining

The airline faces an intense few months as it negotiates new enterprise agreements with four different employee associations.
Photo: Jessica Shapiro

by
Andrew Cleary | Mark Skulley

The public spat that erupted between
Qantas
and its long-haul pilots last week is just the beginning of the industrial relations storm the airline faces in coming months, as pay negotiations with four separate unions representing a majority of employees come to a head.

The long-haul pilots again discussed the possibility of a walkout at a union meeting in Melbourne yesterday, and the Australian Licensed Aircraft Engineers Association (ALAEA) has told Qantas to table a firm offer by today in their long-running negotiations over a new enterprise agreement or it would also seek a secret ballot on legally protected industrial action.

The Australian Services Union, which represents check-in and administration staff, is fighting the introduction of self check-in technology and pushing for wage increases while talks with baggage handlers and in-flight catering workers will begin in the middle of the year.

Whether the war of words is likely to spill over into strikes is something investors and analysts are beginning to contemplate.

“It becomes difficult to work out how much of this is posturing versus how much it could become an operational issue," Deutsche Bank analyst Cameron McDonald said.

Investors including UBS’s George Boubouras said the threat of industrial action was not enough to change their views about owning the stock. Industrial disputes were “part and parcel of dealing with most airlines and that sector globally," said Mr Boubouras, head of investment strategy at UBS Wealth Management. “I don’t see anything that is going to impact it in the shorter term in terms of quality of profit – we’d even suggest it has some upside value, given the macro drivers we have in 2011."

That’s a view shared by Tribeca Investment Partners’ Sean Fenton, who said the “big swing factors" surrounding the global economic recovery were much more important profit drivers at Qantas than the outcome of wage negotiations.

The problem facing Qantas is that it is locked into enterprise bargaining with multiple unions covering its 35,000 employees at the same time as it seeks to cut costs. Increased competition from Chinese and Middle Eastern carriers on international routes and from Tiger Airways and Virgin Blue in Australia are crimping the flag carrier’s profitability.

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The airline is loath to undergo a repeat of engineer strikes in 2008 that saw flights grounded and on-time performance slide to the worst in the country. The public perception of Qantas hit a record low, said chief executive
Alan Joyce
. This time around, there is heightened sensitivity and public scrutiny given recent incidents such as the mid-air explosion of a Rolls-Royce engine on a Qantas A380 aircraft in November.

The imperative for Mr Joyce is to work around the higher staffing costs of the mainline brand by driving growth through low-cost unit Jetstar. It’s an issue also being dealt with by British Airways boss Willie Walsh, who stared down five cabin crew strikes spanning 22 days last year and faces more planned walkouts.

“I don’t think Qantas need to go head-to-head in such an aggressive fashion like BA, and Jetstar is the tool for them to avoid that," said Mr Fenton, a portfolio manager at Tribeca who holds Qantas shares. “It’s a contentious issue for Qantas, and it’s part of the whole Jetstar strategy – getting around some of the higher embedded employee costs at the main airline."

ALAEA secretary Steve Purvinas said it sought pay rises of 3 per cent a year and “revenue neutral" changes to job classifications though unions were more concerned about job security than wage increases. The association has clout – members must sign off before aircraft can depart and work bans cause a maintenance backlog, adding to flight delays and cancellations. “They have got to be prepared to put something on the table for us to consider," Mr Purvinas told The Australian Financial Review. “Otherwise, we’re going to consider and take steps towards an industrial campaign."

It takes several weeks to hold and conduct a secret ballot and unions must then give employers three working days’ notice.

The union representing Qantas pilots, the Australian and International Pilots Association (AIPA), also said resolving job security concerns was its chief aim. AIPA is asking for pay increases it says equate to 2.5 per cent annually.

Qantas has disputed that figure, saying the demands – which include guaranteed staff travel rights, rather than standby, and the reclassification of some pilots to higher pay bands – were tantamount to an 8.15 per cent annual increase. The airline’s highest paid A380 captain is understood to earn close to $500,000, while a Boeing 747-400 captain earns, on average, $350,000. The issue, said AIPA, is whether younger officers were in effect being forced out of the mainline brand to lower pay and conditions at Jetstar.

While the airline grew the Jetstar brand during the recent industry downturn, Qantas pilots were forced to use up annual leave and long- service leave entitlements as the company cut back capacity in the mainline brand. “They’re prepared to do anything required [to protect job security]", said AIPA vice-president David Backhouse, of the long-haul pilots. “That includes, but is not limited to, taking a PIA [protected industrial action] ballot."

While the pilots have traditionally been loath to strike, industry sources said they had previously vented their frustration during enterprise bargaining by burning up or dumping extra fuel at no small cost to the airline.

Qantas is also locked in negotiations with the ASU, which claims to have more than 8000 members working in areas such as check-in, administration, IT and call centres. The ASU last year put in a claim for annual pay rises of 5 per cent plus extra superannuation, as well as improved job security ahead of Qantas unveiling a renewed push towards greater use of automated check-in services. “There’s trouble on a number of fronts," ASU assistant national secretary
Linda White
said. “Our people are not happy campers. Bargaining is at a crucial stage, no doubt about that."

After the three current bargaining rounds, Qantas will negotiate mid-year with the Transport Workers Union, which has thousands of members working in areas such as baggage handling, refuelling, cleaning of aircraft and in-flight catering.